Without context, investors could be spooked by Michelmersh Brick's (MBH) latest results, which revealed a 47 per cent drop in pre-tax profit. Adjusted numbers were much better, although profit still fell slightly to £2.4m from £2.6m due to an increase in administrative expenses. The numbers were hit hard in the period by costs associated with the acquisition of Carlton Main Brickworks, a deal that analysts at Cenkos have said will be “transformative” for the brick maker.
The newly acquired group was only factored in for seven days of this half-year period, but should have a more significant impact in the second half of the year. Pro-forma numbers from management indicate it could up the company’s brick output by 49 per cent and double adjusted cash and operating profit. In pursuing the deal, the group took on debt worth £27m, although leverage is expected to fall now that the transaction has completed.
The group also has a stronger forward order book of 55m bricks – a record in fact – along with a slightly improved average selling price. Analysts at Cenkos have forecast adjusted pre-tax profit of £6.1m and EPS of 5.8p for the year to December 2017 (from £4.8m and 4.6p in 2016).
| MICHELMERSH BRICK HOLDINGS (MBH) | ||||
| ORD PRICE: | 96p | MARKET VALUE: | £82.8m | |
| TOUCH: | 95-97 | 12-MONTH HIGH: | 100p | LOW: 45.5p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 30 | |
| NET ASSET VALUE: | 66p* | NET DEBT: | 37% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 15.3 | 2.6 | 2.57 | nil |
| 2017 | 16.2 | 1.4 | 1.35 | 0.70 |
| % change | +6 | -47 | -47 | - |
| Ex-div: | 14 Dec | |||
| Payment: | 12 Jan | |||
| *Includes intangible assets of £23.7m, or 27p a share | ||||
